Edison Yu, space research analyst at Deutsche Bank, joins Yahoo Finance Live to discuss the potential for a SpaceX IPO in 2024 and the outlook for space stocks and new startups.

Video Transcript

RACHELLE AKUFFO: Elon Musk's SpaceX was recently valued at $137 billion after kicking off the year with a fresh round of funding. The world's top space group has seemingly gone from strength to strength since Musk first launched it 20 years ago in a bid to reduce the cost of transportation in the final frontier. The big question these days, when is it going to go public, and will it be the best way to invest in a booming sector?

Well, joining us now to help make sense of it all is Deutsche Bank Space Research Analyst Edison Yu. Good to see you, Edison. Now, by some estimates, at least according to some sources at CNBC, we might not see that-- we might not see them going public until 2025. But how much of a game changer do you think this would be?

EDISON YU: Yeah, thanks for having me on. And happy new year. So I think a few things there-- right now, you don't really have any big player in the public markets for what I call new space. And the leader of all this is, unquestionably, SpaceX.

So it's going to have, I think, a big positive impact when it does go public, because it brings a lot of investors who probably didn't look at a nascent sector like space into the equation. It forces them to do a lot more work. It takes notice. And I think overall, that will lift space stocks, and especially new space stocks in general, across the board if they do that.

BRAD SMITH: And, Edison, I mean, when you think about the number of investments that are being made in space right now, what are we going to continue to kind of see and expect even here in 2023 when some of those dollars have seemingly, at least seemingly, because of 2022 and the absence of that just cash flow into the more experimental parts of investing, where do you believe that will rebound?

EDISON YU: Yeah. So I think two things there. One, we saw a pretty vicious sell-off in the public-listed space stocks in 2022. And you can run down the list-- you're talking 50%, 60%, 70% drawdowns. And especially in December, you saw that probably exacerbated even further by some tax harvesting, some window-dressing, and [INAUDIBLE]

I think this year, that does change quite a bit. And the reason is because you're going to have several companies, such as Planet Labs, Rocket Lab, that are generating real growth, that are seeing margin improvement. And these will cause investors to take another look.

The second development, which has been in focus, especially, in just the last month, is that people realizing a lot of these space services and space assets are very scarce. And just as an example, we had four rocket failures in the last month, ranging from two in the US, one in Europe, one in China. And it just shows you that getting things, getting assets, important assets, in the space is extremely difficult, is actually a increasingly scarce commodity.

And as we all know, as we've all seen over the past year, scarce commodities tend to go up in price. I think you're going to start seeing some of that dynamic with these space stocks as the year progresses.

RACHELLE AKUFFO: And, Edison, speaking of scarcity, we know that Europe increasingly turned to SpaceX after sanctions on Russia over its invasion of Ukraine. And, really, they highlighted their reliance on some of these Russian rockets. How has this strengthened SpaceX's position, and what does this mean if you have other tech companies also getting into the mix as well?

EDISON YU: Yeah, I think that's a huge part of the strength of the rocket business, the launch business of SpaceX. Essentially, most countries and big corporations right now, they have nowhere else to go if they want a large rocket that can reliably fly to orbit. You're pretty much stuck with SpaceX.

And I think the most obvious example of that is OneWeb. OneWeb is actually a competitor to Starlink, and yet they've flown two missions already to get those satellites there because of the Russia-Ukraine situation. I think that dynamic will only actually get more intense.

You've seen the European launch vehicle Ariane 6 get delayed. ULA looks like they might finally be coming online with Vulcan, but that's been delayed. We've had a bunch of startups, as I mentioned, have failures and delays. So that dynamic, I think, absolutely continues to be front and center. And SpaceX is by far the biggest beneficiary of that.

BRAD SMITH: Edison Yu, Deutsche Bank Space Research Analyst-- Edison, thanks so much for the time, and the insights, and analysis. We've got to leave things there for the day, we'd love to have you back and continue this conversation.